Home Appraisals: A Primer

A home purchase can be the most important investment many could ever consider. It doesn't matter if where you raise your family, a second vacation home or one of many rentals, purchasing real property is an involved financial transaction that requires multiple parties to make it all happen.

You're probably familiar with the parties taking part in the transaction. The real estate agent is the most known person in the exchange. Next, the mortgage company provides the money required to fund the deal. The title company ensures that all areas of the sale are completed and that the title is clear to pass to the buyer from the seller.

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So, what party makes sure the real estate is worth the amount being paid? This is where you meet the appraiser. We provide an unbiased opinion of what a buyer could expect to pay — or a seller receive — for a property, where both buyer and seller are informed parties. A licensed, certified, professional appraiser from Liberty Appraisal Service, L.L.C. will ensure, you as an interested party, are informed.

Appraisals start with the property inspection

Our first responsibility at Liberty Appraisal Service, L.L.C. is to inspect the property to ascertain its true status. We must physically see aspects of the property, such as the number of bedrooms and bathrooms, the location, and so on, to ensure they truly exist and are in the condition a reasonable person would expect them to be. To make sure the stated size of the property is accurate and describe the layout of the home, the inspection often entails creating a sketch of the floorplan. Most importantly, the appraiser identifies any obvious amenities - or defects - that would affect the value of the house.

After the inspection, an appraiser uses two or three approaches to determining the value of the property: paired sales analysis and, in the case of a rental property, an income approach.

Replacement Cost

This is where the appraiser analyzes information on local construction costs, the cost of labor and other elements to derive how much it would cost to replace the property being appraised. This figure often sets the maximum on what a property would sell for. It's also the least used predictor of value.

Sales Comparison

Appraisers get to know the neighborhoods in which they appraise. They innately understand the value of specific features to the people of that area. Then, the appraiser researches recent sales in the area and finds properties which are 'comparable' to the property in question. By assigning a dollar value to certain items such as upgraded appliances, extra bathrooms, additional living area, quality of construction, lot size, we add or subtract from each comparable's sales price so that they are more accurately in line with the features of subject.

  • For example, if the comparable has an irrigation system and the subject does not, the appraiser may deduct the value of an irrigation system from the sales price of the comparable home.
  • But, in the case where the subject has something such as an extra half bath that a comparable doesn't have, the appraiser might add the value of that bath to the comparable property.

An opinion of what the subject could sell for can only be determined once all differences between the comps and the subject have been evaluated. When it comes to knowing the true value of features of homes in Findlay and Hancock, Liberty Appraisal Service, L.L.C. can't be beat. The sales comparison approach to value is typically given the most importance when an appraisal is for a home sale.

Valuation Using the Income Approach

A third method of valuing a property is sometimes employed when a neighborhood has a measurable number of rental properties. In this scenario, the amount of revenue the real estate yields is factored in with income produced by neighboring properties to give an indicator of the current value.

Coming Up With The Final Value

Examining the data from all approaches, the appraiser is then ready to document an estimated market value for the subject property. The estimate of value on the appraisal report is not always what's being paid for the property even though it is likely the best indication of what a property is worth. Depending on the specific situations of the buyer or seller, their level of urgency or a buyer's desire for that exact property, the closing price of a home can always be driven up or down.Regardless, the appraised value is often employed as a guideline for lenders who don't want to loan a buyer more money than they could get back in case they had to put the property on the market again. At the end of the day, an appraiser from Liberty Appraisal Service, L.L.C. will help you attain the most accurate property value, so you can make profitable real estate decisions.